Global markets took a big hit on Thursday after President Donald Trump announced new tariffs that could push the US and the rest of the world into a recession.
The Dow dropped 1,570 points, or 3.7%, early in the day. The broader S&P 500 fell 4.36%, hitting its lowest point since September. The tech-heavy Nasdaq dropped 5.6%. Both the Dow and the S&P 500 were on track for their worst day since the 2022 inflation crisis, while the Nasdaq was set for its worst day since March 2020.
Investors reacted with shock to Trump’s unprecedented move.
“The market is saying this isn’t just bad economics, it’s bad mathematics,” said Michael Block, a market strategist at Third Seven Capital.
Block criticized the Trump administration for its seemingly flawed approach in calculating reciprocal tariffs. “They’re ignoring every rule of classic micro and macroeconomics. This is the policymaking equivalent of a suicide bomber,” he explained.
Liz Ann Sonders, Chief Investment Strategist at Charles Schwab, shared with CNN that many investors had previously believed Trump was merely using tariffs as a bargaining chip.
“Now the market is saying, ‘Wait. This is actually happening. We should have taken him at his word,’” Sonders noted. “What we weren’t liberated from yesterday is uncertainty,” she continued, referencing Trump’s declaration of Wednesday as “Liberation Day.”
Sonders also pointed out that the tariff announcement was far more aggressive than Wall Street had anticipated.
Markets worldwide also suffered. Europe’s main index, the STOXX 600, dropped 2.34%, and Germany’s DAX index fell 2.29%. In Asia, Japan’s Nikkei 225 lost 2.77%, and Hong Kong’s Hang Seng dropped 1.52%.
The sharp declines followed Trump’s announcement of massive tariffs on nearly all goods coming into the US, raising concerns that the policy could lead to a global economic downturn and spark retaliation from other countries.
As a result, the US dollar fell to its weakest level since October. Normally, tariffs might strengthen the dollar, but investors were worried that this policy would harm the US economy in the long term, sending the dollar down against other currencies.
Several companies that rely on international trade were hit hard. Apple dropped 8.7%, Nike fell 12.7%, Best Buy sank 15.3%, and Ralph Lauren tumbled 17.4%. Apple alone lost nearly $300 billion in value from Wednesday to Thursday morning.
Before Trump’s announcement, JPMorgan had already estimated a 40% chance of the US entering a recession. The analysts warned that the tariffs could raise taxes on Americans by $660 billion a year, the largest tax hike in recent history. This would cause prices to spike, adding 2% to inflation.
“The impact on inflation will be substantial,” JPMorgan said. “We view the full implementation of these policies as a substantial macroeconomic shock.”
The shock could be made worse by a decline in consumer and business confidence, along with potential retaliatory tariffs from other countries.
“We emphasize that these policies, if sustained, would likely push the US and global economy into recession this year,” JPMorgan added.
Oil prices also fell on Thursday due to concerns that the trade war could slow global growth and because OPEC is overproducing. US oil futures dropped 7.59%, and Brent crude, the global standard, fell 6.95%.
OPEC+ surprised markets by announcing that Saudi Arabia, Russia, and six other countries would speed up production increases starting in May.
The Business Roundtable, a group of top US CEOs, warned that Trump’s tariffs could harm American businesses.
“Universal tariffs ranging from 10-50% risk causing major damage to US manufacturers, workers, families, and exporters,” said Joshua Bolten, CEO of the Business Roundtable. “Damage to the US economy will grow the longer the tariffs last, and could be worsened by retaliatory actions.”
Trump’s tariffs would increase the US tariff rate dramatically, from 2.5% last year to 22%, according to Fitch Ratings. This would be the highest tariff rate since around 1910.
Fitch Ratings noted that this would surpass the 20% tariff rate set by the Smoot-Hawley Tariff Act of 1930, which led to a global trade war and worsened the Great Depression.
“This is a game changer, not just for the US economy, but for the global economy,” said Olu Sonola, head of US economic research at Fitch. “Many countries will likely fall into recession.”
Sonola added, “You can throw most forecasts out the door if this tariff rate stays in place for an extended period.”
